Pakistan plans mutual fund reforms to boost participation

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MG News | August 04, 2025 at 10:32 AM GMT+05:00

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August 4, 2025 (MLN): Pakistan’s mutual fund industry is set for major reforms as outlined in the white paper titled “Mutual Funds For Masses – Focus Group 2025”, unveiled by the Securities and Exchange Commission of Pakistan (SECP), which presents a comprehensive roadmap to boost retail participation, accelerate digitization, and enhance regulatory efficiency.

Key reforms include the introduction of Infrastructure Mutual Funds and the establishment of a Market Development Fund, aimed at enhancing public awareness through investor education campaigns.

The Mutual Funds Association of Pakistan (MUFAP) is set to be registered as a Self-Regulatory Organization (SRO) by August 1, 2025, with full implementation targeted by December 31, 2025.

This move is expected to improve industry self-governance and efficiency.

The paper outlines major liquidity, governance, and transparency reforms, including swing pricing, dynamic limits for debt funds, reduction of redemption periods, and stress-testing requirements.

It also recommends lowering minimum cash holdings for income and money market funds and increasing prudential limits for listed Sukuk compared to unlisted ones.

On the ETF front, the paper proposes constituting a committee (PSX, MUFAP, brokers) by August 5, 2025, to develop incentives, market-making regulations, and frameworks for debt, commodity-based, and active ETFs.

Regulatory changes are scheduled for November 15, 2025, with ETF awareness made a central priority.

The distribution model will undergo significant updates, including phasing out front-end loads, setting a minimum trailing commission, relaxing distributor entry requirements, and expanding the Sehl Account facility.

Additional steps include integration with the EMLAAK platform, promotion of CGP usage, and improved KYC/CDD practices.

The white paper also introduces a dedicated regulatory framework for ESG Mutual Funds and proposes a structure for ESG Rating Providers (ERPs).

It encourages the development of culturally relevant, mobile-first financial products and calls for collaboration with NGOs and microfinance institutions to drive financial inclusion.

Digital transformation is emphasized through the launch of Digital AMCs by July 30, 2025, along with regulatory support for integration with telecom and e-commerce platforms.

Systematic Investment Plans (SIPs) are also being prioritized, with the removal of front-end loads by August 30, 2025, and integration with RAAST functionality under discussion with the central bank.

The reforms collectively aim to democratize investing in Pakistan by making mutual funds more accessible, transparent, and responsive to diverse investor needs.

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